ApeSwap
  • Welcome
    • 📣ApeSwap has rebranded to ApeBond
    • 👋What is ApeSwap?
    • 🌱I'm New Here
      • 📖DeFi Glossary
    • ⚡QuickStart Guide
    • ℹ️Disclaimers
    • 🍌ApeSwap Tokens
      • BANANA
        • BANANA Tokenomics
        • ⚡How To Buy BANANA
      • GNANA
        • GNANA Utility
        • ⚡How To Convert To And From GNANA
    • 🔍Mission & Vision
    • 🗣️Community
    • 🤝Partnerships
    • 🆘Support
  • Products & Features
    • 👨‍🚀ABOND Migration
      • 🚀How To Migrate
      • 🤔Migration FAQ
    • ⛓️Cross Chain
    • 🌐Wallets & Adding Funds
      • ⚡How To Connect Your Wallet
      • ⚡How To Use ApeSwap On Mobile Devices
      • Add Funds
        • ⚡How To Add Funds
      • Using Zap
    • 🔁Exchange
      • Swap
        • ⚡How To Swap Tokens
      • Liquidity
        • ⚡How To Add Liquidity
      • Pro Trading
        • ⚡How To Use ApeSwap Pro
    • 💰Bonds
      • Liquidity Bonds
        • ⚡How To Buy A Liquidity Bond
      • Reserve Bonds
        • ⚡How To Buy A Reserve Bond
      • ApeSwap Bond Pricing
      • Benefits to Partners
    • 💧Liquidity Health
      • Dashboard Methodology
        • Liquidity Strength
        • Liquidity Ownership
        • Liquidity Concentration
      • LHD Glossary & Tags
      • LHD For Projects
    • 💎Staking
      • Staking Pools
        • ⚡How To Stake Tokens
      • Yield Farms
        • BNB Chain Farms
        • ⚡How To Yield Farm
      • Hard Cap Migration - MasterApeV2
    • 💱Lending Network
      • ⚡How To Lend Tokens
      • ⚡How To Borrow Tokens
      • Lending & Liquidations
      • Lending Market Info
    • 🐵ApeSwap NFTs
      • NFA (Non Fungible Apes)
        • NFA Auction House
      • NFBs (Non Fungible Bananas)
  • ApeSwap DAO
  • ⚖️Governance
    • Governance Proposal Types
  • 📗History
  • 📋Priorities
  • 🏦Financials
    • Protocol Revenue
    • Burn Mechanics
  • ⚙️Disclosures
  • Partners
    • ✅Partner Benefits
  • Where Dev?
    • 📃Smart Contracts
    • 🔮Info & Analytics
    • 🔐Security
      • Audits
Powered by GitBook
On this page
  • Liquidity Concentration Formula
  • Scoring
  • Notes

Was this helpful?

  1. Products & Features
  2. Liquidity Health
  3. Dashboard Methodology

Liquidity Concentration

Last updated 1 year ago

Was this helpful?

Liquidity Concentration (LC) measures the degree to which the liquidity for a project’s token is concentrated to a certain number of liquidity pools. This metric is simple - the fewer pools you have scattered across the blockchain, the more concentrated your liquidity is and the more accessible that liquidity will be with lower slippage and price impact when trading.

Simply put, LC looks to answer the following question: Is this project’s liquidity too spread out?

Liquidity Concentration Formula

LC=tel∑n=1N((1+P(n))∗eln)+∑eluLC = \frac{tel}{\sum_{n=1}^{N} ((1+P(n))*eln)+\sum elu}LC=∑n=1N​((1+P(n))∗eln)+∑elutel​

where:

P(n)=(n−1)∗ankP(n) = (n-1)*\frac{a}{n^k}P(n)=(n−1)∗nka​

Constants configs.:

a=1a = 1a=1

k=0k = 0k=0

Variables description:

nnn: The order each 'penalizable pool' gets assigned by applying the criteria defined below

uuu: Tag that stands for 'untracked'

elnelneln: Extractable Liquidity in pool nnn

elueluelu: Extractable liquidity in pools with uuu tag

Scoring

We look at the overall concentration of pools, and see if the project is spreading their capital too thin.

If any pool has more than $250k of Extractable liquidity then it is automatically not penalized. That is driven by the fact that a pool of that size is material enough to actually benefit your token and provide a decent trading experience for users.

Additionally the first pool below $250k of EL is also not penalized. Depending on a project's goals, it is reasonable to be working on building up an additional liquidity pool.

If there are invalid pairs they are thrown out as that liquidity is likely useless.

The weight of the penalty depends on the number of additional liquidity pools you have below $250k EL and their proportional weight to the overall extractable liquidity the project has.

To put simply, if you have one liquidity pool you automatically get a score of 100. If you have multiple pools all above $250k you also get a score of 100, or if you have a single pool after those multiple pools that is below $250k.

When you start to have multiple pools below $250k you begin to get penalized based on how large those pools are compared to the sum total liquidity you have.

Notes

  • Only valid pair pools are considered, and must be ordered by decreasing extractable liquidity value.

LC calculation:

Then:

LC calculation:

Then:

telteltel: Total extractable liquidity of the project

NNN: Total number of pools in the nnn list

Lastly, assign each pool in the ordered list an nnn value or a uuu tag (uuu standing for ‘untracked’), starting with 1 for the first of the nnn kind, and increasing by 1 for each subsequent pool of the same kind. Pools with extractable liquidity greater or equal than $250,000 should be assigned a uuu tag, and should not be assigned an nnn value, nor should these pools have any effect on the nnn value assigned to the rest of the pools in the list.

Example 1: Project with no uuu tag pools

Pool 1 -> $100,000 extr. liq. BANANA-WMATIC (‘valid pair’) -> n=1n=1n=1

Pool 2 -> $85,000 extr. liq. BANANA-USDC (‘valid pair’) -> n=2n=2n=2

Pool 3 -> $23.000 extr. liq. BANANA-BUSD (‘valid pair’) -> n=3n=3n=3

LC=100,000+85,000+23,000(1+(1−1))∗100,000+(1+(2−1))∗85,000+(1+(3−1))∗23,000LC = \frac{100,000+85,000+23,000}{(1+(1-1))*100,000+(1+(2-1))*85,000+(1+(3-1))*23,000}LC=(1+(1−1))∗100,000+(1+(2−1))∗85,000+(1+(3−1))∗23,000100,000+85,000+23,000​

Example 2: Project with uuu tag pools

Pool 1 -> $300,000 extr. liq. BANANA-WBNB (‘valid pair’) -> uuu tag

Pool 2 -> 250,000 extr. liq. BANANA-BUSD (‘valid pair’) -> uuu tag

Pool 3 -> $100,000 extr. liq. BANANA-WMATIC (‘valid pair’) -> n=1n=1n=1

Pool 4 -> $85,000 extr. liq. BANANA-USDC (‘valid pair’) -> n=2n=2n=2

Pool 5 -> $23.000 extr. liq. BANANA-WBTC (‘valid pair’) -> n=3n=3n=3

LC=300,000+250,000+100,000+85,000+23,000300,000+250,000+(1+(1−1))∗100,000+(1+(2−1))∗85,000+(1+(3−1))∗23,000LC = \frac{300,000+250,000+100,000+85,000+23,000}{300,000+250,000+(1+(1-1))*100,000+(1+(2-1))*85,000+(1+(3-1))*23,000}LC=300,000+250,000+(1+(1−1))∗100,000+(1+(2−1))∗85,000+(1+(3−1))∗23,000300,000+250,000+100,000+85,000+23,000​

💧